- Stocks rise amid new tariff announcements – Equity markets closed higher on Wednesday, as President Trump announced new tariffs on seven countries. Utility and technology stocks led to the upside, while the consumer staples and energy sectors lagged. In international markets, Asia finished mixed overnight, as China's CPI inflation rose to 0.1% annualized in June, above forecasts for a smaller increase to 0.0%.* The U.S. dollar declined against major international currencies. In commodity markets, WTI crude oil traded lower, as U.S. supply stocks rose unexpectedly.*
- Trade remains in focus – President Trump has announced new tariffs on 21 countries this week, with tariff rates in the 20%-40% range.** For countries not reaching trade deals, new tariffs are scheduled to be applied on August 1, which is an extension from the previously announced July 9 end to the 90-day pause. The new tariffs are modestly lower overall — by about three percentage points on average — from those announced on April 2, perhaps signaling some flexibility. Vietnam secured a trade deal with the U.S. on July 2 that imposes a 20% tariff on imported goods originating within that country, a significant drop from the 46% figure announced in April.* The U.K. previously reached a trade agreement that charges 10% duties on exports to the U.S. Based on announced trade deals, though a small sample size of just two, reductions from announced tariff rates appear to be achievable, in our view. We believe any progress in finalizing trade agreements over the coming weeks and months should reduce uncertainty, while any flexibility in lowering tariffs should help contain inflation and growth concerns.
- Bond yields edge lower – Bond yields fell, with the 10-year Treasury yield at 4.34%. The U.S. Treasury auctioned $39 billion of 10-year notes and $65 billion of four-month bills today, which were well-received by markets. Over the coming months, the Treasury will seek to replenish its general account, which was drawn down over the first half of the year. Since reaching the debt ceiling in January, government budget deficits have been funded by account balances and investments. The new tax and spending package – the One Big Beautiful Bill Act – raised the debt ceiling by $5 trillion on July 4, allowing for the Treasury to issue new debt to fund deficits.
Brian Therien, CFA
Investment Strategy
*FactSet **Whitehouse.gov
- US stocks stumble – US large cap equities were mostly lower today, with the S&P 500 large cap index down 0.1%, the Dow Jones falling 0.4% and the NASDAQ broadly flat *. Small cap stocks were the best performers, with the Russel 2000 index up 0.8% *. This followed a mixed tone in overnight equity markets, with major Asian indexes up, but European markets struggling*. Bonds sold off globally, in a move that looks to have originated in Japan as markets fret over the implications of the upcoming election for the fiscal outlook*. However, US Treasuries pared losses late in the trading session to leave yields broadly unchanged over the day. Finally, oil is up 0.5%, the dollar appreciated by 0.4% against a trade weighted basket of currencies, and copper futures spiked nearly 10% to new record highs after the President threatened to increase tariffs*.
- Tariffs back in the spotlight – The Trump administration announced new reciprocal tariff rates for many of its major trading partners yesterday and warned today that if trade deals cannot be agreed then these would be strictly enforced at the August 1st deadline*. The President also announced an intention to raise tariffs on copper imports to 50%, albeit without specifying when this new rate would go into effect*. Chile is by far the largest exporter of copper to the US, although Canada accounts for around 15% of imports**. Finally, Trump warned that pharmaceutical tariffs could spike as high as 200% unless companies start producing these products in the US over the next 18 months*. The renewed headlines around tariffs have shifted market attention back to trade policy and could cause spikes in volatility over the summer. In our view, agreements with major trade partners should avert the worst of the threatened tariff increases, but this week's announcements highlight the risk of a more disruptive path for trade policy.
- A quiet week on the economic data front – Markets will have limited macro data to digest this week, with the minutes from the June Federal Reserve Bank meeting, released Wednesday, and initial unemployment insurance claims, due Thursday, the highlights. Today's NFIB small business sentiment survey showed a small decline in confidence as firms penciled in a more cautious outlook for sales and hiring*. At the same time, a greater share of small business owners are signaling an intention to raise prices*, likely reflecting the impact of tariff increases already put in place. Indeed, we think the impact of tariffs will be more pronounced across inflation and activity data over coming months, as firms are forced to pass these increased costs through to consumers in the face of squeezed margins. However, we don’t think this headwind will be severe enough to threaten the business cycle, with growth most likely to slow as opposed to stall.
James McCan
Investment Strategy
*Bloomberg
**National Minerals Information Center
- Stocks close lower on new tariff announcements – Equity markets closed lower on Monday to start a quiet week for new economic data. Utility and consumer staples stocks posted gains, while the consumer discretionary and materials sectors lagged. In international markets, Asia finished mixed overnight, while Europe was up as Eurozone retail sales growth cooled to 1.8% annualized in May, ahead of estimates for a sharper slowdown.* The U.S. dollar advanced against major international currencies. In commodity markets, WTI oil traded higher amid a tight supply market despite OPEC+ hiking output more than expected at its July 6 meeting.*
- Trade remains in focus – President Trump announced new tariffs today, including 25% levies on goods imported from Japan, South Korea, Malaysia and Kazakhstan.* South Africa will face 30% duties. If the countries don't reach trade deals in July, new tariffs are scheduled to be applied on August 1, which is an extension from the previously-announced July 9 end to the 90-day pause. Trump also announced separately that countries aligning with certain policies of the BRICS bloc of developing countries would face an additional 10% tariff. BRICS countries, which include Brazil, Russia, India, China and South Africa, are currently meeting for a two-day summit in Brazil. While progress on ongoing trade negotiations or new trade agreements could provide some clarity over the coming days, the tariff rates announced today appear to be higher than markets expected, raising inflation and growth concerns.
- Bond yields tick up – Bond yields rose, with the 10-year Treasury yield at 4.39%. The broader trend has been lower as the benchmark yield has pulled back from its May peak near 4.60%. Bond markets have dialed back expectations for Fed interest rate cuts to two this year, down from three** following the Nonfarm payroll report that showed stronger-than-expected job gains in June. We believe the labor market remains healthy but is cooling from a position of strength, which should allow the Fed to stay on the sidelines a while longer to gain greater clarity on the impact of tariffs on inflation. We expect the Fed to be able to cut interest rates in September or October. Lower interest rates should reduce borrowing costs for businesses and consumers, which is supportive of the economy and corporate profits, in our view.
Brian Therien, CFA
Investment Strategy
*FactSet
**CME FedWatch
Thursday, 07/3/2025 p.m.
- Upside surprise in payrolls sparks pre-holiday rally – Markets delivered strong gains* in today's holiday-shortened trading session after a better-than-expected June U.S. labor report. Major U.S. large- and small-cap indexes jumped between 0.75%-1.0% over the day*, while Canadian equities were also up, albeit by a more moderate 0.5%*. Meanwhile, traders trimmed expectations for Fed easing this year in the wake of this data, with 51 basis points (0.51%) of easing now priced over this year in total, compared with 65 basis points at close of play yesterday**. This shift appears to be driving a broader sell-off in Treasury markets, with the 2-year yield up 10 basis points and the 10-year yield up 6 basis points* at market close. Finally, the trade-weighted dollar staged a modest rally, rising 0.45% on the day**, helped by reassuring economic data and an increase in domestic interest rates.
- Reassuring headlines, weaker details – The headlines from the June labor report were stronger than expected. A headline increase in payrolls of 147,000 over the month, coupled with net upward revisions of 16,000 to the past two months of data***, help provide some reassurance that firms continue to hire amidst elevated trade-policy uncertainty. At the same time, the headline unemployment rate fell to 4.1%***, in contrast to expectations for a rise to 4.3%*. However, there were a couple of softer spots in the report. First, the decline in unemployment was in part caused by workers leaving the labor force, with the participation rate falling again in June. Second, job growth in June was flattered by a large gain in public-sector jobs, with private hiring weaker at 74,000***. Still, these data are not consistent with any abrupt slowdown in the economy, and they help support the Fed's patient approach to cutting interest rates. In our view, a rate cut in July looks unlikely, with the Fed much more likely to start easing again in September, data permitting.
- Congress set to pass its giant tax and spending bill – The House of Representatives is fast approaching a final vote on the signature One Big Beautiful Bill Act (OBBBA) legislation. Once passed this will head to the president's desk to be signed into law before Republicans' self-imposed July 4 deadline. OBBBA will deliver a very large package of tax and spending measures, which in aggregate will cost around $3.3 trillion over the next decade, excluding interest costs, according to the Congressional Budget Office estimates. In practice, the legislation will extend the expiring personal tax-cut provisions that were passed during the first Trump administration in 2017, while also adding additional tax reductions for households and businesses. These giveaways will only partly be paid for by lower government spending and changes to green energy tax credits. In our view, the legislation will add a small tailwind to growth in 2026, albeit at the cost of a worse longer-term debt outlook for the U.S. federal government.
James McCan
Investment Strategy
*FactSet
**Bloomberg
***Bureau for Labor Statistics
Wednesday, 07/2/2025 p.m.
- Stocks close higher following U.S.-Vietnam trade agreement – U.S. equity markets closed higher on Wednesday, following a trade agreement between the U.S. and Vietnam. The U.S. will charge a tariff rate of 20% on goods imported from Vietnam, well below the 46% announced in early April, while Vietnam has reportedly agreed to drop levies on U.S. imports.* For goods the U.S. deems have been transshipped through Vietnam (originated from a country other than Vietnam) a 40% tariff rate will apply.* From a leadership standpoint, growth segments of the market, such as technology and consumer discretionary, were among the top performers, while defensive sectors, such as health care and utilities, were among the laggards.* On the economic front, the U.S. ADP employment report for June showed job growth was lower than expected, with private payrolls contracting by 33,000 for the month, signaling easing labor-market conditions.* In Washington, the reconciliation bill is passed back to the House of Representatives following amendments from the Senate, where it's currently under further debate. Bond yields finished higher, with the 10-year Treasury yield rising to around the 4.3% mark.*
- ADP employment report points to softening jobs market – The ADP employment report for June showed that private employment contracted by 33,000 for the month, below expectations for a gain of 115,000 and the first negative monthly print since 2023.* Looking into the drivers, most of the weakness was concentrated in the services side of the economy, with sectors such as education and health services, along with professional and business services, seeing the steepest payroll declines, while goods-producing industries posted modest job gains.** This morning's softer-than-expected job data follows a more upbeat JOLTS job openings report yesterday, which showed job openings climbed to a six-month high in May, signaling healthy demand for labor.* In our view, the tepid job growth reported by ADP over the last two months is indicative of businesses showing reluctance to add additional payrolls amid a changing policy backdrop and slowing economic growth; however, signs of firing appear to have been muted, with the unemployment rate at 4.2% and initial jobless claims below 240,000 last week.* The labor market will remain in focus, with the nonfarm-payrolls report for June out tomorrow morning. Expectations are for nonfarm payrolls to rise by 115,000 for the month and for the unemployment rate to tick higher to 4.3%.*
- Trade policy in focus ahead of July 9 deadline – Trade policy remains in focus for investors, with the expiration of the 90-day tariff pause just a week away. Reports suggest that talks between the U.S. and European Union are progressing, as are negotiations between the U.S. and Canada following Canada’s decision to withdraw its proposed digital services tax. Additionally, the U.S. announced today that it has reached an agreement with Vietnam to lower tariffs on Vietnamese exports to 20%.* However, trade discussions with Japan have reportedly not advanced as smoothly, with Japanese policymakers hesitant to agree to a deal that maintains the current U.S. 25% tariff on auto imports. While developments in trade negotiations could contribute to uncertainty in the coming week, we believe the peak of trade-policy uncertainty has passed, and we do not expect a return to the tariff levels announced in early April. However, despite this de-escalation, tariff rates are still set to be significantly higher than the roughly 2.5% rate at the start of the year.*** In our view, this could pressure corporate profit margins and household purchasing power, potentially leading to slower economic growth. The upshot, in our view, is that household balance sheets remain healthy, and economic data has been resilient through the first half of 2025, which is why we expect moderating but positive economic growth over the remainder of the year.
Brock Weimer, CFA
Investment Strategy
*FactSet **ADP June National Employment Report ***U.S. International Trade Commission